THE IMPORTANCE OF WARRANTIES

CHAPTER 14

Chapter Overview

Warranty is another name for guarantee. An express warranty is an oral or written statement, promise or other representation about the quality, ability, or performance of a product. Express warranties apply to goods that are sold or leased. An implied warranty is a guarantee of quality imposed by law. There are times when warranties are not in force. In this chapter, you will better understand warranties, when they are excluded and how to determine what is covered by the warranties. This information will help you make more informed purchases and save you money.

Section 14.1: Express and Implied Warranties

  • Sellers of goods most often wish to exhibit confidence in their products. They do this by offering a warranty, or a guarantee, promising that the condition of the product is of a certain quality.
  • Sellers offer warranties as incentives to buy their products.


LAW OF WARRANTIES

  • The UCC provides protection against defective products under its law of warranties.
  • If a company does not fulfill the warrant (breach of warranty) it is considered a breach of contract.

EXPRESS WARRANTIES

An express warranty is an oral or written statement, promise, or other representation about the quality, ability, or performance of a product


Express warranties apply to goods that are sold or leased.


To be useful, a warranty must be stated in precise and understandable terms.


You should get an express warranty in writing because oral statements are difficult to prove. Under the parol evidence rule, a court may refuse to consider oral statements if a written contract exists.


A statement about the value of goods or a seller’s opinion is not a warranty.


  • Example of a seller’s opinion: This car gets great gas mileage!
  • Example of a statement of fact: This car gets 30 miles per gallon.


Express warranties are communicated in 3 ways:

1.By a Statement of Fact or a Promise made by the seller

  • A private party or a merchant sells goods and makes a statement (or expression) of fact or a promise about the goods to the buyer…it may be a statement of fact or a promise of something that may happen in the future.

  • Example: A statement from a car dealership that an engine is rebuilt ....if this is an untrue statement, a breach of express warranty occurs

2. By a Description of the goods - seller warrants that the goods will be the same as the description

3. By the Use of a sample or model - when displaying a sample or model, the seller warrants that the goods sold will be the same


Written warranties on products costing $15+ must be made available before you buy the product. Consumers made aware of these warranties when they placed near the product or provide a sign stating that the warranty can be examined...warranty stickers, tags, signs, posters, printed on the packaging.

Advertising Express Warranties

Ads must tell you how to get a copy of the warranty before you buy the product.


Advertisers who use expressions such as “Satisfaction Guaranteed” must refund the full purchase price of their product if the buyer requests it.

Magnuson-Moss Warranty Act

  • law affecting only the sale of goods in interstate commerce (business activities that touch more than one state)
  • Merchants must label written warranties as either “full” or “limited” for consumer products over $10


A full warranty is a promise to fix or replace a defective product at no charge to the consumer


A limited warranty is any written warranty that doesn’t meet the requirements for a full warranty.


Example of a limited warranty: covers only parts, not labor...gives a partial refund when something goes wrong...covers product only as long as it is owned by the original buyer

IMPLIED WARRANTIES

A guarantee of quality imposed by law.

  • Not in writing


Under the UCC, implied warranties apply only to goods that are sold, not services.


Three types of implied warranties:

1. Warranty of Fitness for a Particular Purpose: seller advises the buyer in making a purchase, and the buyer relies on the seller’s knowledge and advice

Example: purchase a product based on what the sales person advised

2. Warranty of merchantability: given only by someone who is a merchant who warrants that their products are fit for the purpose for which it is to be used. A non-merchant is not expected to have the product knowledge that is required to verify merchantability.

Example of a merchantable good and a non- merchantable good: Bike in its original sealed, labeled box / contaminated cheese


3. Warranty that comes from a course of dealing or usage of trade: customary ways in which parties have dealt in the past

Example of usage of trade: buying horse...customary for seller to provide certification papers


WARRANTIES OF TITLE

  • Seller warrants that the title being conveyed is good and that the transfer is lawful ...free from any lien, or claim by another

Section 14.2: Exclusion of Warranties, Privity, and Duty to Notify

The law provides ways in which sellers may be able to exclude warranties on products they sell.


EXCLUSION OF WARRANTIES

Some sellers seek to protect themselves from recourse from buyers by an express exclusion of warranty.


  • To exclude the warranty of merchantability, the word merchantability must be mentioned / written specifically.


  • Implied warranties can also be excluded by the words “as is” and “with all faults”



Consequential damages are losses that do not flow directly from an act but only from some of the consequences or results of the act.


Example: you purchase a freezer, the freezer breaks down...you lose the food...the warranty covers the freezer but not the lost food

Consumer Protection

Under the Magnuson-Moss Warranty Act if a seller makes a written express warranty to a consumer, the implied warranties cannot be disclaimed or excluded.


PRIVITY OF CONTRACT NOT REQUIRED


Privity of contract: people who contract directly with each other


The UCC has abolished the requirement of privity of contract and instead provides 3 alternatives.


In all of the alternatives, express and implied warranties extend to people who would reasonably be expected to use, consume, or be affected by the goods purchased by the buyer.

The UCC alternative to privity used in Ohio is Alternative A-gives sellers warranty to anyone in the family or household of the buyer


DUTY TO NOTIFY AND REMEDIES FOR BREACH

Duty to notify requires that the buyer notify the seller within a reasonable time after the defect is discovered. Failure to do so will prevent the buyer from recovering.